Following an agreement reached Monday night, all coalition factions will vote in favor of the 2007 state budget and the Economic Arrangements Bill, which accompanies the budget.

The Knesset's Finance Committee is to vote on the budget and arrangements bills for 2007 on Tuesday morning, following a series of meetings between faction representatives and representatives of the Treasury and the Prime Minister's Office that continued into the night.

Under the agreement, Labor, Shas, and the Pensioners Party will cede their demands, and the Treasury will honor the coalition agreements reached with those parties.

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The Treasury also agreed to Yisrael Beitenu's demand that NIS 180 million be appropriated for Holocaust survivors and discharged soldiers.

The Labor Party was the last party to reach an agreement with the Treasury.

The main bone of contention was with Labor, whose people stormed out of the negotiations room Monday night after being offered a mere NIS 80-100 million, which party faction head MK Yoram Marciano called "an insulting offer."

Marciano announced that he would give faction members freedom to vote as they saw fit in the Finance Committee.

The treasury reached an agreement with Shas, among other things, to cancel the suspension of children's allowances and old age pensions, not to cancel benefits for discharged soldiers, to help invalids and elderly people in rent payments and to accelerate the state pension legislation.

The Pensioners Party will receive NIS 778 million in 2007 as part of the coalition agreement that was signed upon forming the government.

The treasury and prime minister's people agreed in principle to Yisrael Beitenu's demand to cancel the Israel Broadcasting Authority's license fees for the elderly and funds to fight drugs.

Finance Minister Abraham Hirchson said he believed the 2007 budget would pass the second and third readings next week.

Prime Minister Ehud Olmert said at Kadima's faction meeting on Monday: "There is no more room for negotiations and demands."

At an earlier meeting with representatives of the Treasury and the Prime Minister's Office, Labor's people said on Monday that they would be willing to give up all their social demands, as long as the other coalition members did the same.

At the Labor Party's meeting on Monday, party leader and Defense Minister Amir Peretz spoke out against the budget with unexpected harshness.

"My partnership with Ehud Olmert has reached zero, both in political security issues and social economic issues," Peretz said.

Minister Benjamin Ben Eliezer demanded that Peretz retract his words, but the latter refused. Afterward Peretz said that Olmert had promised him that Labor would receive the Social Affairs portfolio.

During the day Olmert's people tried to reach agreements with factions outside the coalition to persuade them to refrain from voting against the budget.

UTJ demanded NIS 290 million for ultra-Orthodox schools and institutions as a condition for either abstaining from the votes in the Finance Committee and Knesset, or keeping away from it.